Image by Tax Credits via Flickr
It was another rough week to be an investor, as the S&P 500 took a big step back over the past few trading days. The index lost 3.1% of its value during the week, giving back all of last week's gains -- and then some. Healthcare investors were not immune to the carnage as all of the most popular healthcare focused ETFs ended the trading week in the red. It was such a bad week for healthcare investors that the best-performing ETF of the group -- the iShares Dow Jones US Pharmaceuticals ETF (IHE 0.41%) -- still declined 3.21% for the week, lagging the S&P 500.
So what's going on inside the iShares Dow Jones US Pharmaceuticals ETF that allowed it to hold up better than most?
Cracking it open
As its name implies, the iShares Dow Jones US Pharmaceuticals ETF sets itself apart from other healthcare ETFs as that it holds the vast majority of its assets in just a handful of pharmaceutical giants.
Here's a list of the fund's current top 10 holdings:
| Company | Symbol | % Assets |
|---|---|---|
| Johnson & Johnson | JNJ | 10.87 |
| Pfizer | PFE | 8.38 |
| Merck & Co | MRK | 7.65 |
| Allergan | AGN | 6.85 |
| Bristol Myers Squibb | BMY | 6.57 |
| Eli Lilly | LLY | 5.89 |
| Mylan NV | MYL | 4.09 |
| Perrigo PLC | PRGO | 3.90 |
| Zoetis | ZTS | 3.62 |
| Endo International PLC | ENDP | 2.99 |
Table Source: iShares
The fund's oversized exposure to the big boys of the pharmaceutical space helped its share price hold up better than most during the volatile trading week.
What went right this week
There weren't many bright spots to highlight after this trading week as every single one of this funds top 10 positions declined during the period. However, one of the better performing stocks of the group -- which isn't saying much -- was Merck (MRK -0.03%), as it shares only declined a little over 2.5% for the week.
Merck's stock was actually down by much more after investors got a look at its fourth quarter earnings results on Wednesday evening. The report contained mixed results as adjusted earnings per share for the quarter rose 7% to $0.93 when compared to the year year ago period, which was good enough to best analyst expectations by two cents. However the company's top line wasn't as rosy as sales for the period were only $10.22 billion, which was down 2.5% versus the same time last year and came up a bit short of what Wall Street wanted. Merck's 2016 earnings per share forecast of $3.60 to $3.75 was also on the lower side of expectations, so shares took a small tumble.
However, Merck's shares did recover a bit on Friday after the market learned that two of its new drugs had managed to win regulatory approval. First, Merck announced that its newly launched Hepatitis C cure Zepatier is now approved for sale in Canada, as regulators gave it the go ahead as a treatment for patients with Genotypes 1, 3, or 4 of the disease. Second, its anti-nausea drug Emend also won FDA approval as use in combination with other treatments for use in patients undergoing chemotherapy.
Safety in a storm
If you're in the market for a healthcare focused ETF that offers large-cap exposure to the pharmaceutical sector, then you might want to consider giving the iShares Dow Jones US Pharmaceuticals ETF a closer look.
